Peer-to-Peer Product Sharing: Implications for Ownership, Usage, and Social Welfare in the Sharing Economy

• Published in: Management science Vol. 65; no. 2; pp. 477 - 493
• Main Authors: Benjaafar, Saif, Kong, Guangwen, Li, Xiang, Courcoubetis, Costas
• Format: Journal Article
• Language: English
• Published: Linthicum INFORMS 01.02.2019; Institute for Operations Research and the Management Sciences
• Subjects: Analysis; Business ownership; Collaboration; collaborative consumption; Consumer behavior; Consumption; Equilibrium; Industrial development; on-demand platforms; Owners; Ownership; Peer to peer computing; peer-to-peer markets; Product development; Renting; Sharing economy; Social service; Social welfare; sustainability; United States
• ISSN: 0025-1909; 1526-5501
• DOI: 10.1287/mnsc.2017.2970

We describe an equilibrium model of peer-to-peer product sharing, or collaborative consumption, where individuals with varying usage levels make decisions about whether or not to own a homogeneous product. Owners are able to generate income from renting their products to nonowners while nonowners are able to access these products through renting on an as-needed basis. We characterize equilibrium outcomes, including ownership and usage levels, consumer surplus, and social welfare. We compare each outcome in systems with and without collaborative consumption and examine the impact of various problem parameters. Our findings indicate that collaborative consumption can result in either lower or higher ownership and usage levels, with higher ownership and usage levels more likely when the cost of ownership is high. Our findings also indicate that consumers always benefit from collaborative consumption, with individuals who, in the absence of collaborative consumption, are indifferent between owning and not owning benefitting the most. We study both profit-maximizing and social-welfare–maximizing platforms and compare equilibrium outcomes under both in terms of ownership, usage, and social welfare. We find that the difference in social welfare between the profit-maximizing and social-welfare–maximizing platforms is relatively modest. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2970 . This paper was accepted by Gad Allon, operations management.